Thoughts concerning the Volkswagen Diesel TDI debacle
 

I've been on the road for the past couple of days and have only been following the whole VW Diesel TBI scandal on my smartphone.

As I understand it, VW wrote code into their software that would only enable the emissions system if the vehicle thought it might be in a situation where it was being emission tested. If the vehicle's computer detected it was in a situation where an emissions test was unlikely the emissions controls were bypassed so the vehicle owner could achieve more power and better fuel economy.

Apparently VW used inputs like steering, vehicle speed and idle speed to determine whether the emissions system would be utilized or bypassed.

What I don't know at this point is how big of an impact VW's manipulation would have on actual tailpipe emissions. I'm sure the information has been reported, I just haven't read it yet.

It will be interesting to watch how this whole mess unfolds....

Will Volkswagen compensate their Dealers?
 

While much has been written about Volkswagen's potential liability to their vehicle owners I wonder if the company faces any liability from their Dealers?

Has the Blue Sky value of a Volkswagen store dropped due to an illegal action undertaken by the Dealer's OEM?

I'm not necessarily suggesting that the VW Dealers should all sue VW Corporate but I do think the Dealers should be compensated for the losses they incur as a result of this mess.

http://www.scientificamerican.com/ar...issions-deals/

Best explanation I've seen on what they did.

Well, based on recent history, I wouldn't bet on the dealers being able to even get a hearing on the basis of their franchise value being diminished. If the GM and Chrysler dealers that had their entire businesses stolen from them in clear violation of the franchise laws haven't received a dime yet. And the bondholders who had a legal right to recover 100% of their money from the corporate assets before anyone else could touch them, were forced to accept an 11% valuation in violation of the US Federal Bankruptcy Code...then I don't see much chance of the VW dealers being successful in any type of legal action. But then again, the US Government doesn't stand to gain anything by protecting VW, so who knows.

Well put and spot on.

The only happy people at the end of the day would be the lawyers.

Great article - thanks for the link.

I wasn't aware that OEMs essentially negotiated with the EPA concerning how they could configure their emissions devices to temporarily suspend operation so the vehicle had better performance - e.g. climbing an incline, full acceleration to complete a pass, etc.

It was also interesting to read that disabling the emissions system could increase NOx levels by a factor of 40 times.

You make an excellent point - history does not favor any positive results for the VW Dealers.

That said, I think most people would agree that the GM and Chrysler OLDCO Dealers got screwed over and would have prevailed in court but the downside is there were no assets to go after if the Dealers received a judgment.

The VW Dealers, by contrast, still have a living/viable corporation that has the ability to pay a judgment.

Yes , that WAS the situation the terminated dealers faced...but that was only because of a previously unheard of ruling by the Bankruptcy Judge that declared that the Plaintiffs could ONLY file for damages against OLDCO because that was the legal entity that they had a franchise agreement with, and the government structured bankruptcy moved all good assets to NEWCO and left only toxic assets in OLDCO. That's a matter of semantics...NEWCO was the legal entity that sent out the termination letters at the instructions of the Auto Task Force and shut off access to the parts and service computers and left the dealers hanging in the wind. Under that logic, GM and Chrysler could have simply walked away from all the Union Pension obligations too, because that obligation was held by OLDCO just like the franchise agreement was, but instead, the UAW walked away with 50% ownership of both companies and a hefty cash settlement for each worker laid off along with full pension and health benefits for life. Obama said while it was painful for some dealers and employees the sacrifice had to be shared. Well, the sacrifice was pretty damn one sided as far as I can see. :mad:

Also well said!

Easy to find justification using the Golden Rule:

Remember the Golden Rule: He who has the gold makes the rules.

I agree 100%.

By virtue of U.S. law the UAW should have lost 100% of everything OLDCO Chrysler owed them before the bond holders lost their first penny. The UAW held second tier debt and the bond holders held first tier debt.

I remember it was argued by the Task Force and the President that Chrysler's debt was selling at a deep discount on the secondary market just before the bankruptcy and the administration didn't feel the bond holders were entitled to "windfall" profits. Over 200 years of bankruptcy law was tossed into the dumpster because the Task Force was engineering a "quick-rinse" bankruptcy that was designed to save the UAW.

Exactly! The bond holders were entitled to what the law stated they were entitled to...100% of THEIR money that they put into the bonds to begin with. That would have been in no way windfall profits, they would have just received the same amount of money back that they put in. The only profit they would have made was the interest payments on the bonds that they had already received. Bonds are not stock...the fact that Chrysler/GM and Ford's bonds were selling at deep discounts at the time had nothing to do with what they received. The bonds for EVERY corporation were sold with the terms of "first lien status" according to the laws in effect and according to the US Federal Bankruptcy Code. It has always been that way and it is STILL that way...the government didn't change it...they just said they were going to ignore it...and DID.

VW stock will be the buy of a lifetime. Waiting for the bottom. No way Germany will ever let them go bad.

I'd be inclined to agree if for no other reason than the fact that American's tend to have a short attention span and any damage that Volkswagen has currently done to their reputation will likely be forgotten in 12 - 18 months.

As an example, think back to KIA when they were caught red handed manipulating their EPA Gas Mileage Ratings. I bet fewer than 1% of current car shoppers remember that story and attribute negative feeling toward KIA as a result.

VW has withdrawn it's paperwork for 2016 model diesels from the EPA. That means it does not intend to offer diesel vehicles in the US for 2016 at this time. If I was going to buy a VW, TDI was the ONLY option attractive to me, so I would not consider a VW. I feel a lot of VW customers are going to have the same attitude next year......

I am waiting for the employee vs VWOA lawsuit. I have been with VW for over 20 years as a manager and an advisor. I know for a fact this will affect the service industry. Sign me up when the class action starts.